Amazon.com Inc. agreed to purchase the Metro-Goldwyn-Mayer film firm for $8.45 billion, a wager {that a} almost century-old Hollywood icon can feed an insatiable demand for streaming content material.
The takeover is Amazon’s largest acquisition because it agreed to purchase Complete Meals in 2017 for $13.7 billion however follows investments of about $11 billion on content material for its streaming video and music companies final yr alone. Amazon is No. 1 within the 2021 Digital Commerce 360 Prime 1000.
“The actual monetary worth behind this deal is the treasure trove of IP within the deep catalog that we plan to reimagine and develop along with MGM’s gifted workforce,” mentioned Mike Hopkins, senior vp of Prime Video and Amazon Studios, in an announcement. “It’s very thrilling and supplies so many alternatives for high-quality storytelling.”
Amazon shares had been up lower than 1% Wednesday morning in New York.
The proliferation of streaming companies, together with newer arrivals similar to HBO Max and Disney+, has put strain on Amazon to amass extra programming. CEO Jeff Bezos has made no secret of his want for film moguldom, and MGM’s huge backlog supplies an abundance of streaming materials, to not point out a chance to mine the long-lasting James Bond and Rocky franchises for brand spanking new movies and tv exhibits.
Furthermore, with retail rivals like Walmart Inc. (No. 3) rolling out extra subtle on-line shops, Amazon should work even more durable to maintain its 200 million Prime subscribers loyal.
MGM has been seen as a takeover goal for years, however was by no means capable of shut a sale earlier than. The corporate made a contemporary push final yr, when it reportedly employed advisers to hunt presents.
Beforehand, Amazon has acquired smaller startups it perceived as a menace — footwear vendor Zappos, say, or Diapers.com guardian Quidsi. Amazon additionally has snatched up-and-comers in new enterprise strains, similar to the sport platform Twitch or Kiva, which makes warehouse robots.
Huge bucks
It’s uncommon for Bezos to spend large bucks on a legacy enterprise like MGM. The one different instance is the acquisition of Complete Meals Market in 2017, which got here after Amazon spent a decade making an attempt to develop into a participant in grocery gross sales — with little to indicate for its efforts and funding. At the moment, some analysts deem the Complete Meals acquisition wrong-headed and level to the truth that Amazon has since began a rival grocery chain.
For MGM, the studio that introduced James Bond and Scarlett O’Hara to the massive display screen, the deal supplies a finale to a bumpy period of hedge-fund possession that started with a chapter over a decade in the past. MGM’s lead shareholder is the Anchorage Capital Group LLC, which turned an proprietor with three different traders as a part of a 2010 chapter settlement that erased about $4 billion in debt.
MGM’s earnings earlier than curiosity, taxes, depreciation and amortization rose 48% to about $307 million final yr, lifted by revenue from its 4,000-title movie library. However with a scarcity of latest releases, gross sales declined 3% to $1.5 billion.
Below Anchorage, the studio aspired to its outdated glory — a legacy that features “Gone With the Wind,” the highest movie of all time in ticket gross sales, and the biblical traditional “Ben-Hur,” which shares the file for many Academy Awards at 11.
The brand new homeowners employed a moviemaker CEO in Gary Barber, a Hollywood heavyweight recognized for movies similar to “The Hitchhiker’s Information to the Galaxy” and “Ace Ventura: Pet Detective.” He oversaw a brand new James Bond film, “Skyfall,” that generated greater than $1 billion in ticket gross sales — the studio’s biggest-grossing movie ever — and partnered with Warner Bros. on the blockbuster “Hobbit” movies.
MGM additionally branched out into tv. The studio took management of the premium cable community Epix, and acquired the TV manufacturing firm owned by famed producer Mark Burnett, recognized for creating “Survivor” and “The Apprentice.” The studio additionally created the critically acclaimed sequence “The Handmaid’s Story” and “Fargo,” including to a profitable library.
Hedge funds not often dangle on to such investments for various years, and observers lengthy thought that Barber was prepping the studio on the market. In 2017, reviews urged that MGM was in discussions with a Chinese language firm, although no deal materialized.
Lurking turmoil
Behind the studio’s renewed monetary stability below Anchorage and the M&A rumors, there was turmoil inside MGM’s govt ranks. 5 months after Barber’s contract was renewed in 2018, he was abruptly fired by Anchorage CEO Kevin Ulrich. Stories surfaced that the 2 had clashed, and that Barber’s relationship with Bond producer Barbara Broccoli was additionally tense.
Barber in the end walked away with a $260 million exit bundle. Ulrich by no means named a substitute for Barber, and as a substitute created an workplace of the CEO, which has been in place for 3 years. The weird association led the Hollywood Reporter to say Burnett was sowing chaos inside the firm. He was mentioned to have, at the least partly, led to the ouster of movie studio head Jonathan Glickman in early 2020, amongst different executives.
When the coronavirus struck, MGM was significantly hamstrung. Its largest anticipated movie launch, the brand new James Bond movie “No Time to Die,” has been postponed repeatedly. The corporate approached each Apple Inc. and Netflix Inc. about shopping for the movie for his or her on-line companies, however by no means reached a deal.
Whereas dealing with the prospect of manufacturing delays and better prices on account of Covid-19, MGM suffered one other blow. In a June 2020 lawsuit in New York, a lady accused Ulrich of sexual battery in a swanky Manhattan resort in June 2019. The case was in the end withdrawn.
Late final yr, MGM reportedly employed advisers to discover a sale of the corporate. The studio was mentioned to hunt about $5 billion, in contrast with the greater than $8 billion that Ulrich predicted the corporate may fetch given time.
Metro-Goldwyn-Mayer traces its roots again to the Twenties merger of Marcus Loew’s Metro movies with a movie firm run by Hollywood legend Louis B. Mayer. The studio, whereas making nice footage like “Dr. Zhivago” and “2001: A Area Odyssey,” drifted out and in of economic misery within the second half of the twentieth century. Over the a long time it was owned by Time Inc., CNN founder Ted Turner and greater than as soon as by the late billionaire Kirk Kerkorian.
Turner stored a lot of MGM’s library, which is now owned by AT&T Inc.’s WarnerMedia, quickly to be a part of Discovery Inc.
“I’m very proud that MGM’s Lion, which has lengthy evoked the Golden Age of Hollywood, will proceed its storied historical past, and the concept born from the creation of United Artists lives on in a manner the founders initially meant, pushed by the expertise and their imaginative and prescient,” mentioned Anchorage’s Ulrich, who’s chairman of the board of MGM. “The chance to align MGM’s storied historical past with Amazon is an inspiring mixture.”
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